In 1999 the dotcom bubble was still inflating, and the plans’
actuaries predicted that their retirement funds would gain enough
value to pay the increased pensions. By implication, they
assumed that the Dow Jones Industrial Average would reach 25,000
in 2009 and 28m in 2099. It is currently at around
10,300.

Thing is, they held to these ridiculous forecasts even well after
it was obvious to everyone that the dotcom era's returns were
over.

The Dow's pre-crisis peak in 2007 wasn't anywhere near 25,000. It
was just above 14,000. Moreover, the Dow is clearly not going to
reach 28 million by the end of the century.

Thus everyone related to California's pensions must have known
for quite some time that the underlying assumptions were way too
high. Yet, absurdly, when someone tried to correct these
obviously broken assumptions, he was kicked out:

A few years ago Mr Crane [Mr. Schwarzenegger's economic
advisor] tried, as a board member of the teachers’ pension plan
(CalSTERS), to make the assumptions more sane. His fellow
Democrats voted him off the board. But since then the
stock market has fallen sharply and California has tipped into
budget crisis, exacerbated by the additional contributions that
taxpayers are obliged to make to top up the public-sector pension
funds.

On the same day that Mr Schwarzenegger struck his deal with the
unions, for instance, CalPERS ordered the state to increase its
annual pension payment to almost $4 billion. Two studies
estimate California’s unfunded pension liability at about half a
trillion dollars, almost seven times its official debt.

So we're stuck with half a trillion dollars of unfunded promises
to California's public sector workers, thanks to forecast
assumptions so bogus that, rather than merely 'bad' forecasts,
they border on being plain lies.